Morgan Stanley Sees Meaningful Upside to GMs for Avago Technology Ltd.

In a report published Wednesday, Morgan Stanley analyst Craig Hettenbach reiterated an Overweight rating and $68.00 price target on

. In the report, Morgan Stanley noted, “We are Overweight AVGO as the company's above-average growth, strong FCF, diversified revenue stream (after LSI), and consistently high profitability is not reflected in the current multiple (P/E of ~10x pro-forma 2015 EPS for the combined company). We have high conviction in management's ability to execute on driving LSI's OMs from 17% to 30% over the next few years. Notably, Avago doubled its OMs from 15% to 30% post the company's LBO and is very effective at maximizing pricing for its IP, which we think will benefit the LSI business.” Avago Technologies Ltd. closed on Tuesday at $59.00.